Fundamentals Drive Limited Aluminum Price Increases, Aluminum Prices Mainly Fluctuating with Macro Boost [SMM Aluminum Morning Meeting Minutes]

SMM Aluminum Morning Meeting Minutes for 10.31

Futures:During the night session on October 30, the most-traded SHFE aluminum contract opened at 21,200 yuan/mt, reached a highest price of 21,275 yuan/mt and a lowest price of 21,160 yuan/mt, and finally closed at 21,265 yuan/mt, up 0.09%. The night session opened low and then fluctuated upward; the operating center declined but remained at a high level. Technically, the MA moving averages continued their bullish alignment (MA5: 21,273.00 > MA10: 21,259.00 > MA20: 21,138.50 > MA60: 20,955.25). The MACD red bars on the 4-hour K-line chart showed some changes, while the golden cross state was maintained (DIFF: 96.72, DEA: 95.15). Trend-wise, SHFE aluminum remains in an upward channel. Considering the recent highs and lows (low around 20,640, high around 21,365), the resistance is expected to be in the 21,350-21,550 range, and the support in the 20,650-20,850 range.

Macro Front:A spokesperson from the Ministry of Commerce responded to media inquiries regarding the joint arrangements for the China-US economic and trade consultations in Kuala Lumpur. The spokesperson stated that the economic and trade teams of China and the US, through the Kuala Lumpur consultations, reached consensus and achievements mainly in the following aspects: The US side will cancel the additional 10% so-called fentanyl tariffs on Chinese goods, and the 24% reciprocal tariffs imposed by the US will continue to be suspended for one year; the US will suspend the implementation of the 50% penetration rule for export controls for one year; the US will suspend its Section 301 investigations into China's maritime and other sectors for one year; China will properly resolve the TikTok issue with the US. (Bullish ★) On the local time of October 30 in Busan, President Xi Jinping held a meeting with US President Donald Trump. Xi pointed out that the economic and trade teams of the two countries had in-depth exchanges on important economic and trade issues and formed a consensus on resolving issues. The teams of both sides should quickly refine and finalize the follow-up work, maintain and implement the consensus well, and provide a "reassurance" to the economies of China, the US, and the world with tangible results. (Bullish ★)

Fundamentals:Inventory side, this Thursday, the inventory of aluminum ingots in mainstream domestic consumption areas recorded 619,000 mt, an inventory buildup of 1,000 mt WoW, but a destocking of 31,000 mt from the post-holiday high. On a YoY basis, the current domestic aluminum ingot inventory has lost its favorable position of being at the low end compared to the same period in the past three years, increasing by 22,000 mt compared to the same period last year. Demand side, the operating rate of leading domestic aluminum downstream processing enterprises recorded 62.2% this week, down 0.2 percentage points WoW. The overall operating trend further confirms that the industry is transitioning from the peak season cycle to the off-season.

Primary Aluminum Market:Yesterday, SHFE aluminum bottomed out and rebounded in the early session. During the first trading period, SHFE aluminum mainly fluctuated downward, falling from around 20,250 yuan/mt to about 20,200 yuan/mt. In the second trading period, it rebounded to around 20,280 yuan/mt. East China, absolute high prices fluctuated at highs, traders refused to budge on prices and were reluctant to sell. Around market opening, quotations were around parity with the SMM average price, with weak selling enthusiasm. Subsequent actual transactions were at premiums of around 10-20 yuan/mt against the SMM average price. On Thursday, the selling sentiment index in the east China market was 3.03, up 0.11 WoW; the purchasing sentiment index was 3.11, up 0.24 WoW. On Thursday, SMM A00 aluminum was quoted at 21,200 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of around 10 yuan/mt against the 2511 contract, up 20 yuan/mt from the previous trading day. Central China, before market opening yesterday, due to the night session rally, selling sentiment was high. After opening, prices pulled back sharply, suppliers slowed selling, and downstream purchase willingness was weak amid high aluminum prices. Final transaction prices hovered around parity to a discount of 10 yuan against the central China price. Yesterday, the selling sentiment index in the central China market was 2.86, down 0.01 WoW; the purchasing sentiment index was 2.80, down 0.01 WoW. SMM central China A00 was recorded at 21,060 yuan/mt, up 20 yuan/mt from the previous trading day, at a discount of 150 yuan/mt against the November contract, up 10 yuan/mt from the previous trading day. The Henan-Shanghai price spread was -140 yuan/mt, widening 10 yuan/mt from the previous trading day.

Recycled Aluminum Raw Materials:Yesterday, spot primary aluminum prices increased slightly compared to the previous trading day, with SMM A00 spot closing at 21,200 yuan/mt, while aluminum scrap market prices overall held steady. As the traditional peak season nears its end, tight supply remains the main theme in the aluminum scrap market, with procurement prices remaining high, but the sustainability of high levels needs consideration. Yesterday, baled UBC aluminum scrap was quoted in a concentrated range of 16,050-16,550 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 17,600-18,100 yuan/mt (ex-tax). Baled UBC rose 50 yuan/mt WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap each rose 100 yuan/mt WoW. Due to improved demand from downstream alloys, shredded aluminum tense scrap prices rose accordingly. Jiangxi, Hubei, Foshan, Anhui, Hunan, and other regions collectively raised quotations for aluminum tense scrap series, with increases ranging from 100-200 yuan. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai widened by 30 yuan/mt WoW to 2,462 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,207 yuan/mt. Next week, the aluminum scrap market is expected to hold up well, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) potentially moving up to 17,800-18,300 yuan/mt. If primary aluminum prices stabilize above the 21,200 yuan/mt level, it will further transmit positive effects. Combined with restocking demand from secondary aluminum enterprises amid low inventory, the pattern of tight short-term supply is difficult to change. Demand side, the end of the traditional peak season and environmental protection-driven production restrictions suppressing demand for wrought aluminum alloy scrap may intensify market divergence. Close attention should be paid to the procurement pace of raw materials by secondary aluminum enterprises entering the off-season and the sustainability of end-user orders. If primary aluminum prices retreat after a rapid rise, the aluminum scrap market will face downward pressure, especially wrought aluminum alloy scrap varieties, which are at greater risk due to environmental protection-driven production restrictions. Overall, the market will continue to see a tug-of-war between sellers and buyers, and it is advisable to closely track the movement of primary aluminum prices and policy developments.

Secondary Aluminum Alloy:Yesterday, the SMM A00 aluminum price was quoted at 21,200 yuan/mt, maintaining a slight rebound trend, while the SMM ADC12 price rose by 100 yuan/mt to 21,300 yuan/mt. The current tight supply situation for aluminum scrap remains unchanged, coupled with record-high copper prices pushing up raw material costs, forcing enterprises to purchase at high prices to ensure order fulfillment. Due to factors such as insufficient raw material circulation, high-priced raw materials eroding profits, and uncertain policies in regions like Jiangxi and Anhui, industry supply has contracted. Overall demand remains resilient, with some secondary aluminum plants reporting an increase in orders during the week. However, constrained by low finished product and raw material inventories, enterprises are adopting more cautious order-taking strategies, providing some support to market prices. In the short term, supported by rigid cost underpinning and a tight supply-demand balance, ADC12 aluminum alloy ingot prices are expected to hold up well. Subsequent attention should be focused on raw material supply, consumption performance, and inventory changes.

Aluminum Market Summary:The current macro environment highlights positive factors: China-U.S. trade consultations are releasing positive signals; the 15th Five-Year Plan focuses on cultivating strategic emerging industries, and domestic growth-stabilizing policies continue to exert effort, bolstering market confidence. Fundamentally, overseas supply is expected to tighten, while domestic supply remains stable, with an overall contraction in the aluminum supply side. On the demand side, as aluminum prices are fluctuating at highs and severe smog in central China has led to the successive issuance of environmental protection-driven production restriction policies, demand is somewhat suppressed. Inventories are currently maintaining range-bound fluctuations, but with growth in transit inventories and demand suppression from environmental protection-driven production restrictions, inventories are expected to build again. On the cost side, support has weakened somewhat due to declining alumina prices. Overall, with aluminum prices at high levels, downstream processing material enterprises are prioritizing destocking of finished product inventories, leading to weaker demand for raw materials. However, aluminum ingot inventories remain relatively low, and fundamental drivers for aluminum prices are limited in the short term. With continued relatively optimistic macro sentiment both domestically and overseas, SHFE aluminum is expected to find support at the 20,800 yuan/mt level, while facing some resistance at 21,500 yuan/mt in the absence of clear fundamental drivers.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]